Increasing Private Sector Mobilization for Climate Action

Public finance alone will not meet the level of investment needed to address climate change. Canada’s international climate finance aims to mobilize private sector capital for climate action. The private sector plays an important role in the global efforts to reach the investment levels required to create low-carbon and climate-resilient communities.

Canada is using public finance and working with multilateral development banks (MDBs) and bilateral partners to de-risk private investment. In collaboration with other institutions, Canada is helping to:

• reduce technical and financial risks of climate-related investment;
• advance innovative finance tools to boost investment in sustainable infrastructure, like renewable energy;
• demonstrate the commercial viability of projects and unlock future private investments in similar initiatives;
• scale up climate investments and accelerate innovative approaches for climate action.

To make this happen, Canada has taken a unique approach by establishing a number of single-donor funds at MDBs. These climate finance facilities are designed to catalyze private sector investment that would not otherwise happen due to market barriers.

The Canadian facilities at MDBs have mobilized significant private finance for climate-related activities in support of developing countries over the past decade.  Approximately US$304 million is directly attributable to Canada’s investment of US$233.24 million in these facilities, since Canada began reporting private finance mobilization to OECD-DAC in 2017^{Footnote 1} . Of this, Canada’s Fast Start Financing (2010-2013) helped mobilize over US$277 million in private finance. As of 2019, Canada’s $2.65 billion commitment (2015-2021) has so far helped mobilize over US$26 million. These public investments at MDBs take time to create ripple effects in the private sector, but this approach has proven effective so far. There is significant potential for investment in climate solutions by the private sector. Canada’s facilities at MDBs, some of which have been in place since the Fast Start climate finance program, will continue to mobilize private finance for climate action in developing countries for years to come.

Canada’s contributions to Multilateral Development Banks

African Development Bank

In March 2021, Canada provided $132.9 million to the Canada-African Development Bank Climate Fund. The Fund seeks to enhance women’s economic rights and participation in climate action, and will mobilize private capital to fill the climate investment gap in Africa. Projects are expected to significantly reduce GHG emissions by scaling up renewable energy, supporting energy efficient projects, and developing green infrastructure and sustainable cities.

Asian Development Bank

Since March 2017, Canada has provided $200 million for the second phase of the Canadian Climate Fund for the Private Sector in Asia, at the Asian Development Bank. The Fund supports efforts to pursue a low-carbon and climate-resilient development path for the region. This includes gender-responsive activities related to water supply and management, agriculture and forestry, land use management, natural resource management, resilient infrastructure, coastal protection, disaster risk management, clean and renewable energy, sustainable transport and waste management.

Over the life of the Fund, Canada's contribution is expected to leverage up to two times its amount in private sector investment and support up to 100,000 beneficiaries adapt to the effects of climate change. The Fund is also expected to reduce or avoid greenhouse gas emissions of up to 32 megatonnes.

Inter-American Development Bank

Since March 2019, Canada has contributed $223.5 million to the second phase of the Canadian Climate Fund for the Private Sector (C2F2) in the Americas at the Inter-American Development Bank. The C2F2 offers lower-cost, longer-term and higher-risk loans that are needed to jump-start climate change mitigation and adaptation projects across the Latin American and Caribbean region. Projects supported by the C2F2 work in areas such as renewable energy, energy efficiency, climate-smart agriculture, and forestry. The C2F2 has achieved strong gender outcomes by using a performance-based incentive program to encourage its private sector clients to integrate gender considerations into their operations.

The C2F2 is expected to mobilize $2 billion in investments towards low carbon and climate-resilient infrastructure and reduce 25 million tonnes of GHG emissions. This is the equivalent to removing 5,436,998 cars from roads for one year.

World Bank Group

World Bank Sustainable Forest Landscape program: Canada’s $75 million contribution will support the reduction of greenhouse gas emissions by addressing deforestation and forest degradation and foster conservation, sustainable management and enhancement of forest resources in developing countries, including in the Caribbean.

Canada-International Finance Corporation Blended Finance Program (BCFP): Canada’s $250 million contribution to the BCFP provides concessional co-financing to initiatives that:

1. increase private sector financing and engagement across a broad cross-section of climate mitigation and adaptation activities, and
2. seek to promote market transformation activities that can move markets towards low-emissions and climate-resilient pathways. With a growing focus on the poorest and most vulnerable countries, the BCFP promotes gender-lens climate investing, recognizing that climate change disproportionally affects girls and women. With 49% of the funding programmed, the BCFP has mobilized US$501 million in co-financing, including US$344 million in private finance in key areas such as resilient infrastructure, climate-smart agriculture, and renewable energy.